1. Trade Secrets Shilpi Jha
Senior Policy & Legal Counsel for IP-South Asia
United States Patent and Trademark Office

2. Presentation What is trade secret
What can be protected as Trade Secret
Examples of Trade secret
Value of Trade Secret
Why protect trade secret
Ways of Protecting Trade Secret-Laws/Agreements
History of Law development in US
Laws in US
Consideration in choosing trade secret protection-Trade secret over Patent
Theft
Civil and Criminal Remedies
Need for Trade Secret Laws. 1

3. United States places a high level of importance on the protection of trade secrets and their enforcement.
From small and medium sized business to large and diversified enterprises, companies in wide variety of industries rely on trade secrets protections to maintain their competitive edge.
1. Not all information is trade secret, only information having economic value – which when used can be applied for monetary gain.-My kids like ice tea which I prepare =rather than a maid’s preparation –the way of making a ice tea is my secret – the quantity of ice tea and the content of water- but that’s not qualified by trade secret reason being 1. it is not for the economic gain . I have not maintained to keep it a secret.

4. What is a Trade Secret?
Not all definitions are identical, but all are directed toward the same concept:
Information that derives independent economic value, by virtue of not being generally known; and
Has value to others who cannot legitimately obtain the information; and
Is subject to reasonable efforts to maintain its secrecy
1. Not all information is trade secret, only information having economic value – which when used can be applied for monetary gain.-My kids like ice tea which I prepare =rather than a maid’s preparation –the way of making a ice tea is my secret – the quantity of ice tea and the content of water- but that’s not qualified by trade secret reason being 1. it is not for the economic gain . I have not maintained to keep it a secret.

5. What can be protected as Trade Secret?
information,
a formula,
pattern,
compilation,
program,
device,
method,
technique,
or process -
The UTSA defines a trade secret as:
information, including a formula, pattern, compilation, program, device, method, technique, or process,
that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and
is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
[The UTSA is a uniform act developed by the Uniform Law Commission, which is focused on creating laws that can be adopted by states as written or modified. This encourages a more standardized base of laws around the country.
The UTSA or some variant has been adopted by all states except New York, North Carolina and Massachusetts (Texas is the most recent state to adopt in May 2013). The UTSA provides litigants with a state-level civil cause of action against persons or entities that have misappropriated trade secrets. A successful plaintiff can receive money damages and injunctive relief.]
Ref: Uniform Trade Secrets Act, §1(4)

6. Google Page Rank-Program
Listerine Formula
Coca-Cola Formula
KFC Recipe
Method
Google Page Rank-Program
Compilation
Compilation
KFC Recipe
Coca-Cola Formula
A couple of famous trade secrets include:
Coca Cola--The exact formula of Coca-Cola's natural flavorings but not its other ingredients which are listed on the side of the bottle or can is a trade secret. In 1977, Coke divested itself of its entire operations in India in order to not be forced to divulge the secret formula. (Coke has since returned to India).
Google--A link analysis algorithm used to assign a numerical weighting to each element of a hyperlinked set of documents, to measure its relative importance. "PageRank" is a trademark of Google, the PageRank process is patented and PageRank manipulation tools are among Google's trade secrets.
KFC - The ingredient list is kept in a computerized vault with two separate locks, alongside vials of the eleven seasonings, and only two executives have access to the full recipe. They cannot fly together or go in the same car.
Google Page Rank-Program
Method

7. Why Are Trade Secrets Valuable?
Increasing importance to companies of intangible assets( IP)
Foster innovation
Provide competitive advantages
Provide exclusive and unlimited monopoly if properly protected

8. IMPACT OF TRADE SECRET THEFT
Scope of harm to victims; for example:
Loss of competitive advantage
Loss of core business technologies
Reduced profitability
Loss of reputation, image, goodwill

9. Laws That Protect Trade Secrets
Dedicated trade secret statutes
Unfair competition/Unfair trade practices
Contract law
Non-disclosure agreements
Non-compete agreement
Fiduciary relationships
Torts
Different Countries have different way of protecting Trade Secrets
Basically there are two ways of protecting trade secrets:
1. Country given: Laws
2. Companies initiative:-Contractual agreements, non-compete agreement, non-disclosure agreement etc.

10. History of Trade Secret Law in US
In After detailed discussion and deliberation, in National Conference Commission on Uniform State Law (NCCUSL) issued a uniform trade secrets Act (UTSA) in 1979.
This was the first comprehensive effort to codify the laws of trade secret protection.
UTSA incorporated major common law principles while filling gaps left by the courts.
UTSA was left for state to apply.
The federal Government did not take steps to provide national trade secret protection until the mid-1990’s, when congress enacted the Economic Espionage Act of 1996.
The legislative history of the EEA reveals the congressional concerns over growing international and domestic economic espionage against U.S. businesses that prompted the establishment of a more comprehensive federal scheme protecting trade secrets.

11. International Trade Secret Laws
Internationally no trade secret law.
Only Article 39 of the trips agreement talks about undisclosed information
In the US, the states have enacted laws based on the Uniform Trade Secrets Act. The UTSA is a uniform act developed by the Uniform Law Commission, which is focused on creating laws that can be adopted by states as written or modified. This encourages a more standardized base of laws around the country.
The UTSA or some variant has been adopted by all states except New York and Massachusetts (Texas is the most recent state to adopt in May 2013). The UTSA provides litigants with a state-level civil cause of action against persons or entities that have misappropriated trade secrets. A successful plaintiff can receive money damages and injunctive relief.
New York-USTD bill has been passed twice but never the light
Massachusetts
The EEA is a federal-level criminal statute that addresses
theft of trade secrets for the benefit of a foreign government (economic espionage) and
theft of trade secrets in interstate or foreign commerce (theft of trade secrets)
For economic espionage, penalties range up to prison sentences up to 15 years and fines up to $5M for individuals and fines up to $10M or 3X the value of the stolen secret for organizations.
For theft of trade secrets, penalties for an individual range up to 10 years in prison.
Internationally no trade secret law.only Article 39 of the trips agreement talks about undisclosed information

12. Business Consideration in Choosing Mode of Protection
Against Trade Secret /Patent
Business consideration for Trade secret
Desired type and level of protection
Ability to meet statutory requirements (novel, non-obvious, etc.)
Length of protection desired
Markets envisioned
Competitor may legitimately reverse engineer the secret
Secrecy Could be lost even without a bad act
Competitors may develop technology independently
Trade Secret protection complements other intellectual property protections
For the secret owner, the decision is usually between filing for a patent and maintaining the secret as a trade secret.
Patents give enforceable protection against infringers, but
time of protection is limited
details of the “secret” have to be disclosed to get the patent protection, and
the “secret” must meet patent standards, e.g., novel, non-obvious
Trade secret is unlimited in time but has other risks (next slide)
Also to be considered: legal system into which you want to operate
What body of law governs trade secrets?
Which has better protections – patent or trade secret?
Will you have to disclose your secret to government entities and what is your level of confidence?

13. Patent/Trade Mark Patent Trade Mark Enforceable protection Enforce
Time of Protection is limited
Details to be disclosed
Standards to be meet: novel, non-obvious and industrial application
Enforce
Protection unlimited
Details not to be disclosed
No standard-only secret which has commercial value

14. Other Considerations
Also to be considered: legal system into which you want to operate
What body of law governs trade secrets?
Which has better protections – patent or trade secret?
Will you have to disclose your secret to government entities and what is your level of confidence?

15. Trade Secret Theft To have trade secret theft:
A trade secret must exist, and
The acquisition, disclosure or use of the trade secret must be improper
We will break down these two elements as we work through the slides.

16. Trade Secret Theft under Civil Law
Theft of trade secrets refers to theft related to a product or service that is used in interstate or foreign commerce, with harm to the owner and benefit to another.

17. Examples of Civil Cases
DuPont’s Kevlar
Enterprise Car Rental
Dupont’s Kevlar Fibers – Kevlar is a high strength synthetic fiber used in applications as diverse as bicycle tires, equipment, and probably most famously, body armor used by the military and law enforcement. Kevlar is lightweight and extraordinarily strong, with five times the strength of steel on an equal-weight basis. It is best known for its use in ballistic and stab-resistant body armor. DuPont sued Kolon, a company with its headquarters in South Korea, in February 2009, claiming that Kolon had misappropriated trade secrets relating to the body armor, Kevlar, after Kolon hired a former DuPont employee, Michael Mitchell. In the highest damages award to date, DuPont was awarded damages of $919.9 million dollars A criminal case was then filed against the defendants.
Enterprise car rental - Enterprise has filed a lawsuit against a former employee it alleges downloaded confidential documents before taking a job with rival Hertz Rent-a-Car. Enterprise alleges that a former credit card analyst with the company ed “highly confidential, competitively-valuable and trade secret information” about its business to his personal address two days before submitting his resignation.

18. Trade Secret Theft Penalties
Individuals -
Fine, or
Prison term up to 10 years, or
Both
Organizations –
Fine up to USD 5 Million

19. Civil Relief Damages Permanent Injunctive Relief
Damages in civil cases can include both:
actual loss to the plaintiff; and
unjust enrichment caused by misappropriation that is not taken into account in computing actual loss.
Or, the damages may be measured by liability for a reasonable royalty for a misappropriation's unauthorized disclosure or use of a trade secret.
The civil court may also order exemplary damages.
Permanent Injunctive Relief
If a plaintiff is successful in its civil case, it can seek to enjoin the defendant from using the information in its business for a period of time.
The court can also order that any information or items be returned to the plaintiff.

20. Federal Criminal Statute
The Economic Espionage Act of 1996 advances two primary objectives:
the protection of national security
The promotion of economic security

21. Trade Secret Under the Economic Espionage Act
Under the Economic Espionage Act a trade secret consists of three primary components:
Information
Which derives independent economic value from being a secret
That the owner took reasonable measures to protect
Ref: 18 USC §1839(3)

22. Economic Espionage Penalties
Individuals -
Fine up to USD 5 Million, or
Prison term up to 15 years, or
Both
Organizations –
Fine up to USD 10 Million or 3X value of trade secret
Under Section 1831, individuals shall, except as provided in subsection (b), be fined not more than $ 5,000,000 or imprisoned not more than 15 years, or both.
(b) Organizations. Any organization that commits any offense described in subsection (a) shall be fined not more than the greater of $10,000,000 or 3 times the value of the stolen trade secret to the organization, including expenses for research and design and other costs of reproducing the trade secret that the organization has thereby avoided.
Ref: 18 USC §1831

23. Criminal Relief
In criminal Cases Court may order restitution

24. Examples of Trade Secret Cases
Swayamvar
DuPont’s Kevlar
Goodyear’s Tire Building Equipment
Phillip Gabriel Pettersson, a.k.a. Stakkato
Examples include:
Dupont’s Kevlar Fibers – Kevlar is a high strength synthetic fiber used in applications as diverse as bicycle tires, equipment, and probably most famously, body armor used by the military and law enforcement. Kevlar is lightweight and extraordinarily strong, with five times the strength of steel on an equal-weight basis. It is best known for its use in ballistic and stab-resistant body armor. DuPont sued Kolon, a company with its headquarters in South Korea, in February 2009, claiming that Kolon had misappropriated trade secrets relating to the body armor, Kevlar, after Kolon hired a former DuPont employee, Michael Mitchell. In the highest damages award to date, DuPont was awarded damages of $919.9 million dollars A criminal case was then filed against the defendants.
Goodyear Swab Down Device – Goodyear entered into an agreement with a Chinese tire manufacturer, Wyko, to make radial “off the road” (OTR) tires, which are used on very large earth moving and mining equipment. Wyko, in turn contracted with another Chinese company to make a swab down device, which is used during the manufacture of a giant OTR tire. Wyko, however, had never built a swab down device before and was having difficulty in the spring of 2007 completing their design of the device. Two employees of Wyko traveled to a Goodyear tire manufacturing plant and, using their cell phones, surreptitiously took pictures of the swab down device. These pictures were then ed to other employees at Wyko headquarters. Available at The defendants were convicted.
Phillip Gabriel Pettersson, a.k.a. “Stakkato,” -- He was indicted on five counts involving trade secret theft. He is accused of hacking into the secure computer systems at Cisco Systems, NASA and other US government systems from the period of December 2003 until May What is remarkable about this case is, at the time of the indictment, Pettersson was 16 years old and he was accused of committing these acts from 5,000 miles away, in Sweden. Info available at

25. Civil Lawsuit Plaintiff must prove that:
It either developed the trade secret or that it is in lawful possession of it; and
Information has been received by the other party in breach of a protected relationship or was taken in an unlawful manner.
In civil cases, it is not necessary to show the defendant acted in bad faith.
Trade secret misappropriation occurs where:
Defendant uses information in breach of confidence;
Defendant discovers trade secret by improper means;
Defendant learns of trade secret from third party with knowledge that it was obtained improperly; or
Defendant learns of the information with notice of the fact that it was disclosed by mistake.
Under the UTSA, the plaintiff does not have to be using the secret in order to get protection. Mere acquisition of the secret by the defendant is enough.
Plaintiff is not required to show that defendant actually used the trade secret.
With respect damages, the extent to which defendant actually used the trade secret is relevant.

26. Key Terms
Misappropriation: acquisition, disclosure or use of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means

27. Key Terms
Improper means: includes, theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy, or espionage through electronic or other means

28. “Proper” Means
Acquisition of a trade secret is not always a misappropriation
Examples of legal acquisition:
Discovery by independent invention
Reverse engineering where the product was obtained honestly
Appearance in published literature

29. Reasonable Efforts to Maintain Secrecy
Reasonable efforts vary based on circumstances
Common steps:
Limit access
Require confidentiality agreements
Control physical and digital access

30. Reasonable Efforts-Determined by Fact Finder
Whether reasonable efforts have been employed is normally a question of fact for the fact-finder.

31. A Layered Process
Reasonable measures involve layered or tiered processes.
The first layer may include physical security.
The second layer may include computer or electronic limitations.
The third layer may include employment policies and practices.

32. Types of Measures
In United States v. Lange, 312 F.3d 263, 266 (7th Cir. 2002) The court considered several factors to determine that the employer had taken reasonable measures to keep the design information secret.

33. Types of Measures
All of the drawings and data were stored in a secured room, which was protected by:
A special lock
An alarm system
A motion detector.
The number of copies of sensitive information was kept to a minimum and surplus copies were shredded.

34. United States v. Chung
In United States v. Chung, 659 F.3f 815 (9th Cir. 2011) Defendant was a former Boeing engineer who gave technological information to China

35. Securing Facilities Secure facilities
Although none of the documents were kept under lock and key, Boeing implemented general physical security measures for its entire plant.
Security guards required employees to show identification before entering the building, and Boeing reserved the right to search all employees’ belongings and cars. See Chung, 659 F.3d at 827.

36. Policies and Practices
Written policies and procedures
Confidentiality agreements/Non-Disclosure agreements
Need-to-Know disclosures only
Boeing held training sessions instructing employees not to share documents with outside parties, and it required employees, including Defendant, to sign confidentiality agreements. See Chung, 659 F.3d 827
Sign-in and Sign-out procedures

37. Electronic Limitations
Reasonable electronic security measures may include:
Password protected electronics and multiple passwords
Data encryption
No remote or internet access in the area where the trade secret is used
Encrypting sensitive electronic information, such as uncompiled source code
Employing corporate firewalls and virtual private networks for remote access
Maintaining network logs

38. Judicial Decision
John Richard Brady And Ors v. Chemical Process Equipments P. Ltd. and Anr [AIR 1987 Delhi 372]
Plaintiff invented fodder production unit (FPU) in 1972
Filed patent application in India on improved unit

39. Judicial Decision
Defendants established a joint venture company in India to manufacture thermal panels for Fodder production Unit(FPU)
Plaintiffs disclosed technical details of FPU to defendants
Letter of defendants reflected express conditions of confidentiality
Defendants unable to supply thermal panels
Defendants marketed own FPU to compete with plaintiffs
Plaintiffs sought injunction

40. Judicial Decision The court granted the injunction
Took the position that even in the absence of an express confidentiality clause in a contract, confidentiality is implied and defendant is liable for breach of the confidentiality obligations
John Brady case AIR 1987 Delhi 372
•No contract
•Supplied defendant with technical material, specifications and drawings under conditions of confidentiality
•Court
•Held confidentiality implicit in the arrangement
•Restrained defendant from manufacturing products with the said information

41. Trade Secrets – Indian cases
Swayamvar – The Case
Anil Gupta Vs. Kumal Dasgupta
97(200) DLT 257 © Anand

42. Protection Measures Identification
Mark / Label in communications : confidential label/unauthorized disclosure prohibited
Employees: Confidentiality Agreements /Training Programs /Post Employment
Third Parties :Limited Disclosure /Non Disclosure Agreements

43. Protection of Trade Secrets During Court Proceeedings
The trade secret owner cannot protect its rights if it must disclose the secret in open court.
Courts use tools that maintain the ongoing secrecy of the trade secret and still permit trial preparation and conduct. For example:
Protective orders
In camera reviews
Closed courtrooms

44. Need for Trade secret

45. Need For Trade Secret Law
Law is about evolution –Recently in US, Obama Administration has decided to take steps to evaluate the legal environment in United States for the protection and enforcement of Trade Secrets: -Strategies on Mitigating the theft of U.S trade secrets.
Reason being: federal law has not kept pace with technological innovation.
Globalization
Need to protect trade secret –Technology enhancement has led to easy stealing process:
Use of cyber space
Advanced computer technologies
Mobile communication devices

46. INDIA No specific law-only rely on contractual relation
For protecting a trade secret –a company has to enter to several adequate agreements with its employees and/or consultants
No criminal sanction or penalties
Civil remedies and damages are difficult to obtain
Multi-forum approach-leads to multiple issues and time

47. Trade protection in India
Indian Courts have protected trade secrets by applying/interpreting various legislations:
The Indian Contract Act, 1872(Section 27: restraint of trade)
The Copyright Act, 1957( Section 511,55,63)
The Design Act, 2000
The information Technology Act, 2000(Section 65,72)
Indian penal Code(Section 408, 415)
The Competition Act, 2002(Section 3)
Civil Procedure Code
Criminal Procedure Code
Common (Equity , Fraud)

48. Defend Trade Secrets Act of 2016
The salient features:
the DTSA provides for expedited relief on an ex parte basis in extraordinary circumstances unlike UTSA.
The measure amends the Economic Espionage Act of 1996 to create a private (federal) civil cause of action for trade secret misappropriation
Additional remedies under the bill include injunctive relief and damages (actual loss, unjust enrichment, reasonable royalty, double damages for willful and malicious theft).

49. Thank You

50. Reasonable Efforts
What constitutes “reasonable efforts” will vary based on circumstances.
Common, but not only, steps:
Limit access to employees that require the trade secrets to perform their jobs
Require relevant employees to sign a confidentiality agreement
Control physical and digital access